| mrstickball said: You forget one thing though: During the crash of 1987, no additional money was hedged as a protection against further recessions. According to Keynesian ideals , the government should have given out much more than they were in response to the crash. That didn't happen in 1987. In fact, your graph proves the opposite - expenditures as a percentage of GDP grew much slower in 1987-1991 than they did during the 8 years prior. Also, there have been many more recessions in the past 100 years than the 3 stock crashes I showed you. I used the stock crashes as an illustration that they in and of themselves didn't cause the Great Depression. In fact, we've had 22 recessions since the start of the 1900s. I am going to quantify this in the morning by building a spreadsheet to explain how it doesn't work that government spending has removed us from many recessions. There were major, yet short, recessions during many periods after the great depression that were met with no government spending, and we recovered easily from.
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Government spending isn't the only way, you can and should use monetary policy as the first step. Government spending should only be used as a last resort, when monetary policy is infeasible.
